Somehow, particularly this year, the fact that election eve and All Hallow’s Eve arrive but three days apart seems so compellingly appropriate.  Both are scary and both involve an awful lot of people pretending to be something they’re not.  But elections are supposed to have consequences while Halloween does not.  So let’s test that.  Does this election matter for CRE finance?  Or, how many treats and tricks did this election cycle have to offer?

As I write, the election is in the history books.   A resounding Republican victory in the House, while the Ds held on to the Senate by a smidge.  We hear the term game changer tossed around a lot, but will this indeed be a game changer for CRE finance?

First, while it’s doubtful the current administration has exhausted its populist impulses to reengineer the economic and social life of America, I can’t envision any more historic, paradigm shifting legislation coming out of Washington (at least until 2013).  With the Republicans in charge of the House and a cloture-proof Senate with a righter right and a leftier left staring at each other across an empty middle, dramatic legislation seems practically impossible.  That in itself is significant. Count that as a Treat.

Maybe we get the Bush tax cuts extended in the lame duck. Treat 2, Trick 0.  Healthcare is not going away, FinReg is not being repealed, the trillions of stimulus money (and the whopping new debt) can’t be taken back.  Treat 2, Trick 1.  Let’s not forget populist fervor.  Regrettably, it’s not the exclusive province of the left or the right, Democrat, Republican or Tea Party or whatever.  Free Trade is under assault, easy money is a near religion and God knows what else will fire the heaving middle.  Treat 2, Trick 2.

The tiebreaker is regulatory oversight.  This may sound like Washington small ball, but it’s huge in the here and now.

Just like to the man with a hammer everything looks like a nail, to a regulator, everything looks like an opportunity to regulate.  Even absent the jet fuel of a left of center Congress, the regulatory instinct is to regulate.  And that constituency tends to have a tin ear for unintended consequences and is broadly unimpressed by macro arguments of the impact of regulation on capital formation and business in general.

In short, the new Republican majority is likely to have a fairly significant moderating impact on the regulatory implementation of FinReg and any further regulatory shenanigans.  This is a benefit not to be lightly dismissed.  FinReg left so much to the imagining of the regulating community – it invites the regulators to exercise unprecedented power to shape the new lending and capital formation environment.  If that brief opportunity had been empowered by the left-leaning (oops, “progressive”) Congressional leadership of the last Congress, we’d without a doubt have seen a Congress encouraging, if not demanding, the broadest possible interpretations of government power and authority to constrain business behavior.  A right-leaning House leadership will likely do the contrary.

I hope those who say gridlock is good for business and the country are right, cause that’s what we’ve got.  Gridlock is pretty thin gruel to set the table for a return to prosperity.  But, as 2011 dawns, the regulatory burden should be materially lighter than would have been the case if Messrs. Dodd and Frank, Kanjorski and the like still held the whip hand.  So, we’re Treat 3, Trick 2.

We should, therefore, look to the fundamentals of the economy for our guidance as to what the next couple of years will look like with more confidence.  I said in this column a few weeks ago, why not be optimistic that, on the whole, the fundamentals for 2011 don’t look bad.  So perhaps November 2nd this time around represents a little more treat and a little less trick and we can get on with the business of business.

By Rick Jones.